Why Pegasystems Shares Are Rocketing Today

Pegasystems Inc PEGA shares are trading higher by around 13% after Wedbush analyst Daniel Ives upgraded the stock and raised the price target.

The analyst upgraded the stock to Outperform from Neutral at an increased price target of $65 (from $50).

Ives believes PEGA has witnessed improvements and incremental strength in the key Cloud business and continues to boost customer value.

The analyst sees the company's model as stabilizing, resulting in more recurring revenue and higher gross margin generation led by its cloud business.

Ives expects PEGA to witness accelerating Pega Cloud adoption through leveraging generative AI in its developer community, given its clear growth prospects.

However, he notes that the company believes current generative AI is not complex enough to build and run its workflow automation. 

Nevertheless, the analyst believes PEGA's 'layer cake architecture' and public/ private data usage will be a tailwind for low-code platforms in the coming years.

Also, the analyst thinks Appian Corporation APPN lawsuit-related legal issues are overblown.

Ives sees the suit resolution as not concluding for years and expects PEGA to pay significantly less than the original estimation of $2.036 billion as the settlement amount.

The analyst estimates revenues and EPS of $1.39 billion and $1.51 in 2023 and $1.53 billion and $2.10 in 2024.

Price Action: PEGA shares are up 13.4% at $55.56 on the last check Wednesday.